WestJet's positive unit revenue trend. 2016 still challenging for airlines, but investors encouraged

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Canada’s second largest airline WestJet endured a tough 1H2016 that encompassed plunging unit revenue and a difficult start to its highly anticipated launch of widebody flights to London Gatwick. But its prospects are looking slightly more positive for 2H2016 as sequential trends for its unit revenue performance improve, and its London operation is showing sustained signs of reliability. However, the shaky launch of service to London has created some cost pressure, which has driven WestJet to revise its 2016 unit cost guidance upwards.

Although WestJet has adjusted its capacity in Alberta, which is suffering fallout from the reliance of its economy on the energy sector, the airline has not declared that the weakness in the territory has hit a bottom.

WestJet continues to maintain system capacity guidance of 7% to 9% for 2016, and maintains that the bulk of the increase is driven by the four 767 widebodies it is operating to London. Perhaps in a bid to quell some concern about its high single-digit growth, the airline also stresses – stripping out the 767 growth – that its capacity increases are in line with Canada’s GDP.

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